A machine is purchased for $60 000. It is estimated that it has a useful life of 5 years and will then be sold for $5000. Using the straight-line method, calculate the amount of depreciation to be charged for each year of useful life.Group of answer choices$5000$12 000$0$11 000
Question
A machine is purchased for 5000. Using the straight-line method, calculate the amount of depreciation to be charged for each year of useful life.Group of answer choices12 00011 000
Solution
The straight-line method of depreciation spreads the cost of the asset evenly over its useful life. Here's how you calculate it:
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Determine the cost of the asset. In this case, the machine costs $60,000.
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Determine the residual value of the asset. This is the value of the asset at the end of its useful life. In this case, the machine will be sold for $5,000.
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Determine the useful life of the asset. In this case, the machine has a useful life of 5 years.
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Subtract the residual value from the cost of the asset. This gives you the total depreciation over the asset's useful life. In this case, 5,000 = $55,000.
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Divide the total depreciation by the useful life of the asset. This gives you the annual depreciation. In this case, 11,000.
So, the amount of depreciation to be charged for each year of useful life is $11,000.
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